Current Policy
e.g., 30 for "Net 30"
Current bad debt as % of sales
Days sales outstanding
Proposed Changes
Expected % change in sales (positive or negative)
Expected % change in DSO (positive = slower payment)
Expected % change in bad debt rate
Financial Context
Annual cost of carrying AR balance
Recommendation
consider
Moderate positive impact on net income (6.3% increase). Carefully evaluate risk factors before implementing.
Risk Level:medium
Financial Impact Summary
Sales Change:$400,000
Gross Profit Change:$160,000
Bad Debt Change:$29,600
AR Carrying Cost:$14,918
Net Income Change:$115,482
Net Cash Flow Impact:$33,696
Policy Comparison
| Metric | Current | Proposed |
|---|---|---|
| Sales | $5,000,000 | $5,400,000 |
| Gross Profit | $2,000,000 | $2,160,000 |
| Bad Debt | $100,000 | $129,600 |
| Net Income | $1,838,356 | $1,953,838 |
Key Insights
- •Estimated sales increase of $400,000 (8.0%)
- •Bad debt expense increases by $29,600 - monitor credit quality closely
- •DSO increases by 7 days - slower cash conversion
- •Net income improves but cash flow worsens due to increased AR - monitor liquidity
Get Expert Financial Guidance
Speak with our team about how we can help streamline your back office operations.